Conventional Mortgage
Definition of "Conventional mortgage"
A mortgage requiring a substantial down payment. It is usually only available to those having good credit, and has fixed monthly payments for the life of the loan. It usually has a 30 year period of fixed interest rates discharged on an amortized basis with equal monthly payments. The term conventional refers to a mortgage that is not FHA-insured or VA-guaranteed. Since there is no third person or entity to insure or guarantee the mortgage, the lender assumes full risk of default by the borrower. A lenders decision to make a conventional mortgage is usually dependent upon: (1) the value of the property being used to secure the debt and (2) the credit and income position of the borrower. As more and more conventional mortgages have been made, the loan to value ratio (relationship between the amount borrowed and the appraised value of the property) has continued to increase, even though most lenders still limit the amount they will lend to no more than 80% of value unless private mortgage insurance is carried. This down payment required is higher than with either VA or FHA loans. As the market price of residential real estate has continued to increase, a larger cash down payment has been required of the borrower, and thus many people have been eliminated from financing with a conventional mortgage. With both guaranteed and insured mortgages, people have been able to purchase real estate with a smaller cash down payment.
Popular Real Estate Terms
Statue designed to protect lenders if a seller secretly sells substantially all of the business property. The objective of the law is to safeguard against defrauding creditors. ...
Within Real Estate, “nuisance” is a term used to describe any disturbance that might affect neighboring houses. Nuisance abatement is the enforcing of policies and codes that ...
Method of selling and obtains possession, but the seller retains the title. ...
Inspection required in certain types of sales of property to determine if termites are present within a building. ...
A roof having two slopes on each side. The second slope is longer than the first part of the roof and extremely steep. ...
Contract that intends to convey property form one individual to another but is defective in one respect. ...
Section of the Internal Revenue Code that addresses tax-free exchanges of certain property. The general provisions for a tax-free exchange of real estate are that the properties must be ...
Rental agreement directly between the landlord and tenant. If the tenant then rents it out to another, it is referred to as a sublease. The relationship takes the following form: ...
In order to define the rate of return on investment, or more commonly known as ROI we are also going to explain how it can be calculated and what to look for in the return rate. Investing ...
Have a question or comment?
We're here to help.